CA Health & Safety Code Section 11817.8

(a)

It is the intent of the Legislature that the state and the counties work together to minimize audit exceptions. Audit findings as contained in the department audit reports may be appealed by counties directly to the department. Counties may retain disputed audit amounts while an audit appeal is pending and then only to the extent that the audit appeal is resolved in favor of the county and the amount is in the county’s favor.

(b)

The department shall audit the expenditures of counties, direct contractors, and county subcontractors. The department shall develop an annual audit plan that will identify the counties, direct contractors, and county subcontractors funded in whole or in part with the funds administered by the department. The annual audit plan shall consist of a sufficient number of audits and financial reviews to provide reasonable assurance that federal and state funds have been used for their intended purpose in accordance with applicable funding requirements and restrictions contained in statutes, regulations, and contracts.

(c)

The department may conduct investigations, audits, and financial related reviews on other than a routine basis of any county, direct contractor, or county subcontractor funded in whole or in part with funds administered by the department, as the department deems necessary and appropriate.

(d)

Counties may audit the expenditures of organizations funded in whole or in part with funds administered by the department.

(e)

A county shall repay to the department amounts of state and federal funds found, as a result of an audit, not to have been expended in accordance with the requirements set forth in this part, federal block grant law, federal or state regulations pertaining to alcohol or other drug abuse services, and the conditions set forth in any contract for alcohol and other drug abuse services or an interagency agreement. For organizations or services and the conditions set forth in any combination of state, federal, or other public funds, where a clear audit trail shows that the source and application of these funds is not maintained, repayment shall be determined by prorating audit findings between each funding source.

(f)

For those audits conducted by the department, the director shall administratively establish policies and procedures for the resolution of disputed audit findings. The department shall consult with county administrators when proposing changes in the procedures for the resolution of disputed audit findings.

(g)

There is established in the State Treasury an Audit Repayment Trust Fund. The money in the fund shall be available upon appropriation by the Legislature.

(h)

The department may deny or withhold payments or advances of funds to a county if the department finds, by audit or otherwise, that a program is not in compliance with this part or the contract.

(i)

Notwithstanding subdivision (a) of Section 53134 of the Government Code, audits performed pursuant to this section shall be conducted by qualified state or local government auditors or independent public accountants in accordance with generally accepted governing auditing standards, as prescribed by Government Auditing Standards, issued by the Comptroller General of the United States. These audits shall be completed no later than six months after the completion of the audit fieldwork.

(j)

(1)Notwithstanding the rulemaking provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific the amendments to this section made by the act that added this subdivision by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions from the department until regulations are adopted pursuant to that chapter of the Government Code.

(2)

The department shall adopt emergency regulations no later than July 1, 2014. The department may subsequently readopt any emergency regulation authorized by this section that is the same as or is substantially equivalent to an emergency regulation previously adopted pursuant to this section.

(3)

The initial adoption of emergency regulations implementing the amendments to this section and the one readoption of emergency regulations authorized by this subdivision shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare. Initial emergency regulations and the one readoption of emergency regulations authorized by this section shall be exempt from review by the Office of Administrative Law. The initial emergency regulations and the one readoption of emergency regulations authorized by this section shall be submitted to the Office of Administrative Law for filing with the Secretary of State and each shall remain in effect for no more than 180 days, by which time final regulations may be adopted.